The move bans the Hamburg-based bank— known as EIH Bank for its German initials—from the U.S. financial system. The Wall Street Journal reported in July that Tehran was increasingly reliant on EIH to conduct business on behalf of the regime's blacklisted companies.
In recent years, larger European banks have been unwinding their business ties with Iran under pressure from U.S. officials eager to frustrate Iran's ability to do business in support of its controversial nuclear and weapons programs
"As one of Iran's few remaining access points to the European financial system, EIH has facilitated a tremendous volume of transactions for Iranian banks previously [blacklisted] for proliferation" said Stuart Levey, the Treasury's top counter terrorism official.
EIH, which is owned by the Iranian government but licensed as a German bank, becomes the 17th financial institution blacklisted by the U.S. for allegedly supporting weapons proliferation or international terrorism.
EIH is also the first financial institution designated for supporting Iran's allegedly illicit activities since the July passage of a sweeping U.S. sanctions law that allows the Treasury to also impose sanctions on banks that do business with entities such as EIH on the department's list of so-called Specially Designated Nationals.
The Treasury said EIH has handled "billions of dollars" of transactions for Iranian banks and provides financial services to Iranian entities already blacklisted by the U.S. for allegedly supporting proliferation. They include: Bank Mellat; Persia International Bank; the Export Development Bank of Iran; and Post Bank of Iran.
U.S. officials cited four examples between 2007 and 2009 in which EIH facilitated business for Iranian missile and weapons companies, including Iran Electronics Industries. In one six-month period beginning in late 2007, Treasury said, EIH and Bank Mellat helped Iran's missile program purchase more than $3 million of material.
The U.S. has accused Bank Mellat of supporting Iran's Atomic Energy Organization. The AEO reports directly to Iranian President Mahmoud Ahmadinejad and is responsible for developing the country's nuclear capabilities. Iran says it wants nuclear power for peaceful purposes—a claim disputed by the U.S. and its allies.
A spokeswoman for EIH Bank declined to comment. A spokesman for the German Bundesbank, which oversees banks in Germany, declined to comment. A German foreign-ministry spokesman said the U.S. informed its German counterparts about the Treasury action in advance.
German officials said in July that they were investigating EIH. People familiar with the matter said that probe is continuing
In blacklisting companies or individuals, Germany, together with its European Union counterparts, takes its cue from the U.N. Security Council, which hasn't designated EIH a supporter of Iranian proliferation. The U.S. blacklist is far more extensive.
Critics of the global sanctions regime say the lack of harmonization among U.N., EU and U.S. sanctions allows Tehran to exploit the differences and continue to finance its nuclear ambitions. U.S. sanctions are by far the most extensive: Washington bans business with all of Iran's major state-owned banks. In the U.N., Russia and China have supported softer penalties.
EIH was founded by a group of Iranian merchants in Hamburg in 1971. It operates openly under the supervision of German bank regulators. Officials say it has become an important locus in Europe for facilitating Iranian trade in euros.